UNITED STATES - Public School Teachers' Pension and Retirement Fund of Chicago is issuing redemption queues on all of its open-ended commingled funds.

Rob Kochis, principal at The Townsend Group - the pension fund's real estate consultant - said the commitments now amount to $365m (€283.4m) but the market turbulence has breached the boundaries of its asset allocation strategy.

"The main factor for doing this is that the pension fund has some re-balancing issues with its real estate programme. The investor still believes in real estate as an asset class on a long-term basis.  The pension fund would not be doing this if it were not for the difficult financial times that are occurring in the marketplace."

Chicago Teachers has a targeted asset allocation for real estate of 9% but the sum now invested amounts to over 13% of its assets so the pension fund has filed redemption queues worth $100m each on its PRISA, Strategic Property Fund and Trumbull Property Fund investments and $65m for PRISA II.

Kochis said it could take as long as two years before the fund is able to withdraw all of its capital back from the funds.

"There were several years where the pension fund did achieve good returns in these funds. Some [returns] were in the double digits. We do realise that we will be giving some of this return back by getting out of these funds now with asset values declining," he added.

Chicago Teachers has in some cases been invested in the funds for at least seven years.

The PRISA commingled fund series is managed by Pramerica Real Estate Investors while Strategic Property Fund is run by JP Morgan Asset Management and the Trumbull Property Fund is advised by UBS Realty Investors.

They all mainly invest in established and leased office, industrial, retail and apartments in the US.

Topics